Too Few Ships Drives Bid Prices for Cargo

Wednesday, October 24, 2007
The world's fleets of cargo ships are aging, and demand for commodities is surging. That means the cost of shipping will go up, pushing up prices and crimping supply. The top performing ETF year to date is Market Vectors Steel SLX, which has returned 72.65%. Other ETFs with big gains were iShares Dow Jones (NYSE:DJ) U.S. Oil Equipment IEZ, iShares S&P Global Materials Sector Index Fund, MXI and WisdomTree Basic Materials DBN. The iShares ETFs returned 41.60% and WisdomTree Basic Materials returned 38.43% year to date. The price of oil was a big factor for the iShares ETF, and that price in part reflects the cost of transport, just as with many other commodities. Shipping costs are measured by the Baltic Exchange Dry Index, an indicator of prices for transporting freight. That index has risen 145% year to date and 171% over the past 12 months. Lag time between decommissioning old ships and building new ones also drives costs. It can take three years to build a large cargo vessel. Many are just being started now. Commodity prices tend to rise with the index because they have to be physically moved. ETFs that track commodities themselves will therefore rise with it. Stocks of commodity producers will also rise. But those companies that produce processed commodities such as steel might be under pressure as the cost of raw materials goes up. Dan Chamby, portfolio manager at BlackRock who manages the Global Allocation Fund, says investors should think about the components of commodity ETFs. He also notes that stocks of shipbuilders and oil rigs also do well when commodities face upward price pressure. So when looking at commodity ETFs it pays to think about whether such companies are in them. Market Vectors Steel has ArcelorMittal MT as its second-biggest piece, and the ADR has gained nearly 80% for the year. As a steel producer, one might think it would be sensitive to increases in iron prices. But Bob Shearer, another BlackRock portfolio manager, notes that the global economy has been able to absorb the increased prices without demand falling off -- even with gold and oil reaching new highs. [Source: Investor's Business Daily]
Maritime Reporter June 2014 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds

Finance

Canal Project Slows Panama Economy Growth

Panama's economy expanded in May at its slowest pace since 2009 as major public works projects, including an expansion of the Panama Canal, slowed or wrapped up,

Gas Prices Help Offset Statoil's Output Drop

Statoil's second quarter 2014 net operating income was NOK 32 billion, a decrease of NOK 2.3 billion compared to the second quarter of 2013. Adjusted earnings were NOK 32.

Asia VLCC Rates Could Nudge Higher on Activity

Rates for very large crude carriers (VLCCs) on key Asian freight routes could hold steady or gain next week as charterers seek to complete their vessel chartering

Coast Guard

USCG Change of Command in Galveston

A Coast Guard lieutenant commander and graduate of Hastings High School in Houston, took command of Maritime Safety and Security Team Galveston during a ceremony in Galveston Thursday.

Cause of S.Korea Ferry Businessman's Death Remains Unknown

Yoo's body too badly decomposed to determine cause of death; mystery surrounding final days of de-factor owner of doomed ferry deepens. Yoo's son arrested in latest capture of family members.

USCG Leadership Development Center Change of Command

The Coast Guard’s Leadership Develop Center will have its first change of command ceremony Thursday, July 31 at 11 a.m. in front of Yeaton Hall at the U.S. Coast Guard Academy in New London, Conn.

 
 
Maritime Careers / Shipboard Positions Maritime Contracts Maritime Standards Offshore Oil Pipelines Pod Propulsion Port Authority Ship Simulators Shipbuilding / Vessel Construction Sonar
rss | archive | history | articles | privacy | terms and conditions | contributors | top maritime news | about us | copyright | maritime magazines
maritime security news | shipbuilding news | maritime industry | shipping news | maritime reporting | workboats news | ship design | maritime business

Time taken: 0.1741 sec (6 req/sec)